Updates to Pensions Tax Exemption and Pensioners’ Tax Rebate Rules

On 3 March 2026, the Minister responsible for Finance introduced targeted amendments to Malta’s existing subsidiary legislation governing the tax exemptions and rebates on pension income through the publication of L.N. 52 of 2026 entitled the Tax Rebate (Pensioners) (Amendment) Rules, 2026, and L.N. 53 of 2026, entitled the Pensions (Tax Exemption) (Amendment) Rules, 2026.

The amendments are intended to significantly enhance the tax exemption on pensions whilst phasing out tax rebates in respect of income earned after 31 December 2025

Qualifying pensioners have in previous years of assessments been able to benefit from two separate mechanisms, namely a pensioners’ tax rebate and a phased partial exemption on qualifying pension income, available in terms of Subsidiary Legislation 123.174 and Subsidiary Legislation 123.204 respectively.

Background

Tax Rebate (Pensioners) Rules (S.L. 123.174)
The Tax Rebate (Pensioners) Rules (S.L. 123.174) provide that individuals aged 61 and over, in receipt of pension income and chargeable to tax at the standard progressive resident rates, may qualify for a tax rebate calculated by reference to pension income and subject to specified caps. These caps have been revised over time, with the latest maximum rebate for basis year 2025 capped at €696 for individuals applying the single rates.

Pensions (Tax Exemption) Rules (S.L.123.204)
The Pensions (Tax Exemption) Rules (S.L. 123.204) introduced a phased-in partial exemption on qualifying pension income, increasing progressively over the years to a full (capped) exemption.

What’s new?

L.N. 52 of 2026 introduces a cessation provision, such that the Tax Rebate (Pensioners) Rules cease to apply in respect of income earned after 31 December 2025.

• L.N. 53 of 2026 significantly increases the maximum amount of pension income that may qualify for a tax exemption, effective from basis year 2026 onwards. In particular, the cap under Rule 3 of S.L. 123.204 is now increased from €16,636 to €37,104.
• Additionally, LN 53 of 2026 integrates a tax rebate rule effective as from the same year for qualifying pensioners subject to a capping of €540.

 

Deloitte’s view

These Legal Notices signal a shift from the pensioners’ rebate under S.L. 123.174, which is now expressly limited to income earned up to 31 December 2025, towards a widened pensions tax exemption under S.L. 123.204, including a significantly higher exemption cap from year of assessment 2027 onwards and a new limited rebate mechanism for qualifying taxpayers.

Taxpayers are advised to carefully assess their position. Deloitte remains available to assist in assessing the application of these measures and in ensuring appropriate implementation.